A Libertarian's Approach to Drug Legalization

Professor Jeffrey Miron of Harvard University recently spoke at the National Economists Club about drug legalization. I summarize his remarks below:

----------

All told, the United States spends $41 billion on drug prohibition every year. There are 1.6 million drug related arrests every year. And as the jails overflow and expenses mount, the US government is forgoing $47 billion in tax revenue every year. There are also multiple unquantifiable costs to prohibition such as the opportunity cost of allocating resources to enforce the law. Advocates argue that prohibition reduces use and crime. But is this really the case? Professor Jeffrey Miron of Harvard University argues that the costs of prohibition far outweigh the benefits. The solution…a laissez faire approach to legalization.

Miron concedes that prohibition does in fact lower demand modestly, but it does not eliminate the supply and demand for drugs. The expected penalty is rather low which has negligible effects on demand. Advocates also argue that prohibition makes production more expensive, driving up the price, decreasing consumption. Certainly producers have to keep operations on the down low. However, since the early 80s, prices are down 80%. Miron argues that if producers and dealers are involved in an illegal activity, they aren’t going to be paying income taxes, or abiding by child labor or minimum wage laws, etc. Therefore, a producer’s marginal costs are extremely low, relative to legal businesses.

For anyone who has seen an episode of Boardwalk Empire recently, the comparison between the War on Drugs and the prohibition of alcohol in the 1920s is an easy one. Looking at data on deaths from cirrhosis of the liver, Miron suggests consumption only decreased 20%. Meanwhile violence increased. Producers and dealers can’t settle their disputes by legal means so they resort to violence. The same goes for other prohibited activities such as prostitution and gambling. Quality control, the spread of HIV through dirty needles, corruption, and a litany of other issues arise when a black market is created.

Miron suggests there are four ways of looking at legalization. (1) Rational Drug Consumption: Without making judgments on drug use one could say that people gain utility out of it, otherwise they wouldn’t use drugs. In this respect prohibition is a utility cost, not a benefit. (2) Paternalism: If we decide to discourage drug use, a Pandora’s Box of government intervention is opened. One should be able to respectfully differ in their opinion of drugs. At any rate, alcohol is an easy substitute for drugs. (3) Externalities: Advocates of prohibition argue that negative externalities of drug use such as the effects on unborn children and the strain on the health care system are significant. Miron argues the magnitudes of these externalities are highly exaggerated, particularly when compared to alcohol. When a question about the effects on kids of having meth addicted parents was brought up, Miron suggested irresponsible parents will be irresponsible with or without access to drugs. The policy must balance costs and benefits. (4) Morality: Advocates of prohibition argue that drug use is immoral and has undesirable side effects. While this may be the case, Miron notes that many of the side effects of prohibition are also considered immoral; the increase in violence being the most notable. Surprisingly, Miron suggests prohibition creates a redistribution of wealth in the direction of producers and dealers due to the fact that income taxes are not being paid. With a little smirk, Miron suggested most people would not want to subsidize this type of activity…

Jeffrey Miron is a Senior Lecturer and Director of Undergraduate Studies in the Department of Economics at Harvard University, as well as a Senior Fellow at the Cato Institute. His field of expertise is the economics of libertarianism. He has advocated for many libertarian policies, including legalizing all drugs and allowing failing banks to go bankrupt. He has written four books including "Drug War Crimes: The Consequences of Prohibition" and "Libertarianism, from A to Z." He served as the chairman of the Department of Economics at Boston University from 1992 to 1998.

----------

It is my own personal opinion the the costs of prohibiting and incarcerating people for some drugs probably outways the benefits. However, I don't think a blanket laissez faire approach is appropriate. For instance: I don't think Meth has done anyone any favors. A drug by drug approach is probably best. It should be noted that I don't use drugs.